Economic projections III (European Union)

The European Commission’s economic projections for 2022 point to growth of 4%, a figure slightly lower than the autumn estimates; however, Paolo Gentiloni (in charge of the portfolio), said that this exercise does not consider the political dimension of the Member States. An example is the case of the legislative elections in Portugal.

This review stems from the decrease in activity at the end of 2021 and the beginning of 2022, as a result of the behaviour of the Ómicron variant in Europe. Other factors that explain this reality summarize: i) the scarcity of raw materials and equipment whose impact is felt in industrial production; ii) lack of manpower; and, iii) the high price of energy regardless of its origin (non-renewable versus renewable sources).

However, the trend will change in the second quarter, according to European Commission technicians, with an improvement in the health scenario and normalization of trade flows on a global scale is the factors mentioned. Thus, an increasing behaviour is estimated up to the 4% threshold at the end of 2022. In fact, the commissioner devalued the behaviour in the last quarter of the Eurozone; and, he reiterated that the expectation is that “the economy will regain traction and the expansionary trajectory, with all Member States surpassing wealth levels prior to the pandemic”. And, for 2023, even more moderate growth is estimated, but higher than the previous forecast of 2.5%.

Studies show that private consumption will be the engine of growth due to the recovery of employment and record levels of accumulated savings; as well, high investment dynamics are assumed in light of the: i) favourable financing conditions; ii) implementation of the two-year national recovery/resilience plans; and, iii) societal activation.

It should be noted that the Commission was forced to recalculate the inflation estimates, which presented a considerable increase in 2021; and, faster than expectations, reaching a record value of 5.1% in January 2022. However, according to this review, the annual average value will be around 4%.

Gentiloni blamed energy prices and global supply chain problems for this temporary behaviour. And, it reinforced the European Union’s intention to further alleviate the inflationary spiral in 2023. The objective is to obtain a value of less than 2%, more specifically 1.7%, and whose reference value fits the principles of the European Pact and the European Central Bank itself.